Planning Through Life's Disruptions

Advising Late in Life Divorce

How to help your client untangle, and protect, a mature retirement portfolio

by Lili A. Vasileff, CFP, CDFA

Ms. Vasileff received the national 2013 Pioneering Award for her public advocacy and leadership in the field of divorce financial planning. Lili is the President Emeritus of the national Association of Divorce Financial Planners and is a member of NAPFA, FPA, and IACP. She is President and Founder of Divorce and Money Matters, LLC serving clients nationwide from Greenwich, CT. Her website is

Every 10 seconds a Baby Boomer turns 60 years old.  As a Baby Boomer approaching retirement, let us assume that you and your spouse have been fiscally responsible for most of your lives. Together with your financial advisor, you have plotted forward an investment strategy that eases you into a comfortable standard of living during your retirement years. You have diligently addressed major gaps in retirement savings and focused on meeting needs, both anticipated and unpredictable, along the way.

You probably maximized all retirement benefits with employers and individual savings.  Chances are that your investment portfolio is mature and positioned for longevity, to replace income for lost earnings, and is diversified.  The financial planning process has provided you with confidence that in retirement, you will have enough money and not outlive it.

But what happens when one household now unexpectedly divides itself in two with a late in life divorce? 1 in 4 couples getting a divorce is older than 50.  Gray divorce is prevalent and statistics clearly indicate that more divorced adults are becoming divorced seniors than in any other prior generation.

More to untangle

Divorcing later in life is different in many ways: you have more to untangle and you suddenly face life alone when you are older.  You have to deal with several challenges: dividing one household into two; re-evaluating near term retirement goals; revising estate planning goals; contending with longer life expectancies; addressing gaps in health insurance coverage; and, re-examining investment decisions.  It is truly a “perfect storm” where not only are your financial goals turned upside down, but planning is further complicated often by emotional and psychological turmoil afflicting your rational decision-making.

Wealth clearly makes a difference to retirement preparedness and to planning opportunities. However, what matters most at the outset of divorce is to budget for the cost of divorce, cover your fixed expenses (“the basics”), and prioritize cash and liquidity.  Look at three factors:  the sources of your retirement income, the flexibility of your budget, and your ability to tolerate risk both on a practical and psychological basis.

Divorcing later in life is different in many ways: you have more to untangle and you suddenly face life alone when you are older

From there, you can restructure a mature portfolio to project cash flows

(1) based on investment scenarios to replace earned income or lack of spousal support;

(2) based on developing solutions for creating cash flow.

These solutions may include working in retirement, reverse mortgages, decreasing expenses, annuitizing assets,  and exploring claiming strategies to maximize your and your ex-spouse’s social security benefits,  etc .

A shift may have to happen in the way you invest and you may have to rebalance your portfolio in order to:

  • Seek greater income or yield
  • Weigh options for giving up control over investments for the guaranty of income in retirement from an annuity
  • Evaluate risk reward for aggressively investing in equities for growth if pensions and social security meet needs
  • Recalibrate more frequently
  • Shed high risk or private complicated and illiquid investments

Investment Schedule

Be aware that your natural inclination will be to stop investing after you or your ex-spouse retires or to switch to overly conservative investing.  If your needs are being met with current income or cash flow, it is probable that you should want your money to keep growing after you retire.  What this means is that you should:

  • Design asset allocation to optimize for taxes
  • Diversify to lower volatility
  • Research low cost investment target date mutual funds for short term ladder approach to meet near term needs for supplemental cash

Finally at this stage of life, if you divorce, focus on your priority for financial security, and then later, on stages of retirement.  There’s no perfect formula.  Tough choices need to be made.  For example, your divorce agreement may not provide sufficient spousal support for you to make gifts, allowances, or cover expenses for your adult children, relatives or charitable “causes”.

It is important to be prepared to avoid financial disaster and mismanagement of your net worth.  I suggest you routinely measure portfolio performance against needs and goals, especially in times of low investment yield, volatile markets, and limited capacity to replenish investment losses with income.  Gray Divorce is the beginning of a new era for mature portfolio management. ◊